However, individual banks, their staff and various employers’ associations have reacted critically to the new register. Among other aspects, they fear that investment advisers may be prematurely sanctioned on the basis of the number of complaints against them. In this interview, BaFin Chief Executive Director Karl-Burkhard Caspari clears up this and other misconceptions about the register.

Mr Caspari, investment advisors are worried that the employee and complaints register will strip them of their privacy. Can anyone now access information on times and places of employment, qualifications and the number of customer complaints?

Caspari: No, advisers do not need to be concerned about these issues. They have not been stripped of their privacy for two reasons: Firstly, the employee and complaints register is an internal BaFin database. Third-parties do not have any access to it. And secondly, information on advisers’ qualifications is not even recorded in the database.

Which information does the database contain?

The surname, name at birth and first names, and the date and place of birth. Furthermore, the date on which the adviser commenced and terminated reportable activities. Investment services enterprises must also notify BaFin of the responsible sales representative.

What about complaints?

If private customers complain about an investment adviser, we record the date on which the investment services enterprise received the complaint as well as the organisational unit to which the adviser was assigned at the time or for which he/she predominantly worked.

We also store the adviser’s identification number as issued by BaFin. Otherwise, our database records reprimands and prohibitions of employment under section 34d (4) of the German Securities Trading Act (Wertpapierhandelsgesetz – WpHG) that have been received in respect of the adviser or of the company as a consequence of the adviser’s activities.

Why does BaFin also record unjustified complaints?

It is true that BaFin must also be notified of complaints that the adviser or his/her employer consider unjustified. However, BaFin is merely informed of the fact that a complaint has been received on a certain date. Initially, no information is provided in respect of the actual allegation or complaint. We principally assume that the number of complaints alone may indicate possible misconduct by the adviser. This is why we investigate when an adviser or sales representative has attracted an unusually large number of customer complaints.

What is the procedure?

As a first step, we request further information regarding the complaints from the investment services enterprise. If there are plausible indications that a violation of the Securities Trading Act may have taken place, we investigate further. We may, for example, visit the relevant branch and discuss the matter directly with the adviser and the responsible sales representative.

Should advisers expect to be prohibited from employment if a certain number of complaints have been made against him/her?

The employee and complaints register does not work like the Flensburg Traffic Offense Register. BaFin will not reprimand investment advisers or prohibit their employers from entrusting them with the provision of advisory services for a certain period of time just because a certain number of complaints has been received.

Penalty points in Flensburg are issued for misconduct. This does not apply to complaints in the BaFin database. As I said before, investment services enterprises must also notify BaFin of complaints they consider unjustified. Hence, a customer complaint does not necessarily mean that an adviser or a company is guilty of misconduct. This can only be assessed after BaFin has investigated the concrete details of the matter.

Do investment advisers get an opportunity to present their side before BaFin issues a ban on employment?

Certainly. Before we prohibit an investment services provider from entrusting a certain employee with the provision of investment advisory services for a period of up to two years, the adviser in question will receive an opportunity to comment on the matter.

However, such prohibitions are always a measure of last resort. According to German law, BaFin should take this measure in serious cases only, for example when customers’ interests have been blatantly violated or elementary duties have been neglected. We have less severe means at our disposal, for example reprimands, that can be issued directly to the investment adviser.

Is it not true that BaFin’s employee and complaints register is directed at the weakest link in the chain? Does it not add ‘complaints pressure’ to ‘sales pressure’?

It is true that more attention is now directed towards investment advice and hence investment advisers. However, this applies to the entire sales organisation. Since April 2011, the Securities Trading Act has included special requirements pertaining to sales guidelines. And since the beginning of November 2012 , investment services enterprises are required to measure the expertise of their advisers and their sales representatives against the WpHG Staff Notification Regulation. Aside from their investment advisers, the enterprises are now also obliged to notify BaFin of their sales representatives.

BaFin will also assess whether individual advisers attract an unusual number of complaints. In all cases, BaFin will investigate the relevant background. Let me give you an example: If an adviser has engaged in misconduct due to organisational shortcomings, BaFin will also initiate measures against the investment services enterprise and its management. If an investment adviser intentionally violates internal guidelines and even deceives his/her superiors, BaFin will not hesitate to impose sanctions against the adviser.

Your explanations will have removed some concerns. Nevertheless, one co-operative bank has lodged a constitutional complaint against the register. How do you explain this?

I decline to comment on the constitutional complaint. BaFin will focus on performing its responsibility of implementing the statutory regulations.

As mentioned before, many concerns are based on misunderstandings. This is why BaFin has been providing extensive information on the subject for over two years: We have met with numerous representatives of the banking industry and the employers' associations, held presentations for stakeholders and replied to over 500 enquiries. Our website contains a separate section on the subject and the BaFinJournal (only available in German) has also carried a number of relevant articles.